The Free economic zone «Brest»

For investors interested in building up an enterprise in the Republic of Belarus, FEZ “Brest” is the unique place to locate their business. The Zone is created by Ukase of the President of the Republic of Belarus No.114 of 20 March 1996. It occupies a specially allotted territory with the total area 71 sq.km and has an advantageous geographical position. The city of Brest is a centre of transit service: railway tracks provided with the system of changeover to the European gauge standard are crossing it from south to north and from west to east. A ramified network of motor roads facilitates passenger and freight traffic to neighbouring and distant foreign countries. Transit corridor No.2 Berlin-Warsaw-Brest-Minsk-Moscow passing through Brest is of special importance. There is an international all-weather airport of the first grade on the FEZ territory as well as a water thoroughfare that connects Brest river port with the Black Sea by the Dnieper-Boog channel. The importance of FEZ “Brest” geographical position has become still greater when Poland joined the European Union.

Two districts are included into FEZ “Brest” borders:

the first one is situated northwest of Brest adjacent to the state frontier of the Republic of Belarus near “Kozlovichi-Kukuryki” frontier motor crossing point;
the second one is to the east of Brest in the area of the airport adjacent to the international superhighway E-30 Berlin-Warsaw-Minsk-Moscow.

In December 2001 the not-used territories of Brest 5 largest industrial enterprises were included into the Zone.

Free Economic Zone “Brest” was created for a period of 50 years and has a production and export orientation.
The state guarantees investment protection and free transfer of profit abroad by its legislative acts and does not interfere in the operational and economic activity of the enterprises if it is not contrary to FEZ legislation.
Free Economic Zone activity is managed by FEZ Administration. It also registrates FEZ residents on the basis of a resolution of Commission for Improvement of Economy Competitive Capacity formed by the Council of Ministers of the Republic of Belarus and deals in the matters of allotment of land to the residents.
There were 96 enterprises operating in FEZ “Brest” as of 1 October 2005 including 74 enterprises with foreign capital. The actual volume of investment exceeds 260 million dollars.
The capital of 23 countries is represented in FEZ. The main investing countries are Belarus, Russia, Germany and Poland. The volume of output, labour work force and export are increasing 1,5 times a year.

1. Free Economic Zone residents pay a limited number of taxes and charges within the framework of special legal regime:

profit tax paid at 50 percent reduced rate in comparison with the rate fixed by the law (12%);
income tax (15%);
value added tax (18%);
excise duties;
use tax on natural resources (ecological tax);
land tax (or lease payment);
state and patent taxes;
licence and registration fees;
offshore fee;
stamp duty;
levy on use of transport facilies in business activity;
local taxes and levies (2% of net profit amount);
payment for waste recycling and payments for other harmful influence on the environment;
allocations to Social Protection Fund (35% of the wages fund);
allocations to State employment promotion fund (1% of the wages fund).

2. FEZ residents’ profit got from sale of domestic manufactured goods (work, services) is exempt from imposition of a profit tax for five years after their declaration of profit.

3. Value added tax calculated at the rates fixed by the legislation of the Republic of Belarus is paid by institutions that are FEZ residents at the rate of 50 percent of the turnover tax payable for sale of domestic manufactured goods that are produced by them on FEZ territory and are import substitutes in accordance with the list specified by the Byelorussian Government.

4. A special legal regime effective on FEZ territories in relation to their residents applies to: - FEZ residents’ sale of domestic manufactured goods (work, services) produced by them on FEZ territory to foreign legal and (or) natural persons in compliance with contracts concluded between them; - FEZ residents’ sale on the territory of the Republic of Belarus of domestic manufactured goods produced by them on FEZ territory that are import substitutes in accordance with the list specified by the Byelorussian Government; - FEZ residents’ sale of domestic manufactured goods (work, services) produced by them on FEZ territory to other FEZ residents in compliance with contracts concluded between them.

5. A special legal regime does not apply to: public catering, gambling business, commercial and commercial-purchasing activity, investment business; sale of goods (work, services) that are produced (performed, rendered) with the use of fixed assets owned by a FEZ resident or belonging to a FEZ resident by any other property right, and (or) labour of FEZ resident’s workers outside FEZ territory;
activity of banks, nonbank credit and financial and insurance organisations;
sale of goods that cannot be placed under customs regulations of a free customs zone as well as individual operations that cannot be located within free customs zones owing to restrictions and interdictions imposed by the Byelorussian Government.
Within the frame of the special legal regime, FEZ residents are not exempt from real-estate tax on the fixed assets located outside the corresponding FEZ territories.

6. FEZ territory and free customs zones located there form part of the customs territory of the Republic of Belarus. A free customs zone territory may not coinside with FEZ territory and is specified inside FEZ by decision of its administration. During customs clearing of goods produced by FEZ residents that are exported from the free customs zone territory to the other part of the customs territory of the Republic of Belarus: - customs duties and taxes are not collected and economic policy measures are not employed if these goods belong to import substitutes in accordance with the list specified by the Byelorussian Government; - exported goods are liable to imposition of import customs duties and taxes in compliance with the legislation if they do not belong to import substitutes.

7. As for goods exported from the free customs zone territory to Russian Federation, a payer is granted import customs duty and tax credit for a term not exceeding 100 days after customs clearing of those goods.
If the payer presents at the stated date a document confirming the use of value added tax zero rate in relation to the goods exported to Russian Federation and if that confirmation document is certified by a taxation body of the Republic of Belarus, import customs duties and taxes are not to be paid.
The right of land disposal on FEZ territory belongs to Administration, it determines a rental payment in compliance with the legislation of the Republic of Belarus with an allowance for a place of object’s location, plot of land size and type of investment; that payment amounts to 0,4-1,0 conventional unit per 1 sq.m a year. The land is leased out to investors for a period of up to 50 years.
Rental payment for offices amounts on the average to 6 Euro per month, for working areas - 1,5-2,5 Euro per month. For special legal regime application, FEZ «Brest» residents should have a legal address and working areas within FEZ borders.

You may find practically all the information about FEZ «Brest» in Internet under the address: http://www.fez.brest.by. We are also ready to answer any of your questions. Telephone in Brest: +375 (162) 20-46-31, fax: +375 (162) 20-08-83, e-mail: info@fez.brest.by.